ROME Italian Prime Minister Mario Monti met party leaders on Saturday to drum up support for new measures aimed at shoring up public finances, helping growth and calming the debt crisis in the euro zone's third largest economy.
Italy's cabinet is set to approve the package of reforms on Monday, a step seen as vital for re-establishing Italy's shattered credibility with financial markets after a series of unfulfilled promises by the previous government.
The plan will then be outlined during two news conferences - one with foreign reporters - and presented in both houses of parliament in the afternoon.
Government sources familiar with the plan say the mix of cuts and tax rises will total about 20-25 billion euros over the next two years, about half of which will be used to reduce the budget deficit and help balance the budget by 2013 despite the economic downturn and rising borrowing costs.
The rest will free up resources to try to regenerate Italy's recession-bound economy.
Pier Ferdinando Casini, head of the centrist UDC party, said after meeting Monti that the measures would be severe, but hopefully also fair.
"When the doctor arrives, it's difficult to prescribe nice medicine. Medicine is always bitter, but sometimes inevitable to prevent the patient dying," he told a news conference.
Angelino Alfano, secretary of former premier Silvio Berlusconi's PDL party, said he had urged Monti to ensure the cuts did not fall heavily on those who have always shouldered the burden, and to show special consideration for families.
The plan is expected to include an increase in the retirement age for many workers, liberalizing professional services, raising income tax on higher income brackets and new taxes on private assets and luxury goods.
Monti will meet unions and local authorities on Sunday to try to reach a broad consensus on the plan. He has said fairness is one of the key priorities of his reforms, but unions are grumbling about possible pension and labor market changes.
Susanna Camusso, secretary of Italy's biggest union CGIL, said she was struggling to see signs of equity in the plan, based on what she knew so far from reports, but would wait until after speaking with Monti on Sunday to make her judgment.
"We are ready to support the right decisions but also determined to oppose those we consider wrong," she said at a union assembly on Saturday.
Italy has been at the centre of Europe's debt crisis since yields on its 10-year bonds shot up to around 7 percent and above, similar to levels seen when countries like Greece and Ireland were forced to seek a bailout.
Monti will have to balance the competing needs of showing budget rigor while not choking off growth, without which it will be impossible to reduce a debt mountain equivalent to 120 percent of gross domestic product.
Changes to pensions will be key in the new reform plan, with eligibility requirements toughened up for so-called seniority pensions which are based on a combination of workers' age and the years for which they have paid contributions.
Programmed cuts to the national health service budget are expected to be accelerated by one year, to reduce spending by 2.5 billion euros in 2012 and 5 bln euros from 2013, a local government source said.
A local housing tax (ICI) may also be reintroduced, bringing in estimated revenue of at least 3.5 billion euros per year.
Other expected measures include further increases in value added tax rates and a ban on cash transactions above 500 euros in an effort to tackle tax evasion.
(Editing by David Cowell)